Ryan Snow Sports Company has two divisions, Wholesale and Retail, and two corpor

Question

Ryan Snow Sports Company has two divisions, Wholesale and Retail, and two corporate service departments, Tech Support and Accounts Payable. The corporate expenses for the year ended December 31, 2012, are as follows:

The other corporate administrative expenses include officers' salaries and other expenses required by the corporation. The Tech Support Department charges the divisions for services rendered, based on the number of computers in the department, and the Accounts Payable Department charges divisions for services, based on the number of checks issued. The usage of service by the two divisions is as follows:

The service department charges of the Tech Support Department and the Accounts Payable Department are considered controllable by the divisions. Corporate administrative expenses are not considered controllable by the divisions. The revenues, cost of goods sold, and operating expenses for the two divisions are as follows:

Prepare the divisional income statements for the two divisions.
(Here is what I have so far... I get stuck at less servce department charges:)

Wholesale Division Retail Division Gross profitIncome from operationsOperating expensesRevenues $ $ Cost of goods soldGross profitIncome from operationsTech support department Gross profitLoss from operationsOperating expensesRevenues $ $ Accounts payable departmentIncome from operationsLoss from operationsOperating expenses Income from operations before service department charges $ $ Less service department charges: Cost of goods soldIncome from operationsOperating expensesTech support department $ $ Accounts payable departmentGross profitIncome from operationsOperating expenses Income from operationsLoss from operations $ $

Explanation / Answer

Well, the tech support charges are based on the number of computers so the wholesale would get 400/650 * 845,000= 520,000 and the retail would get 250/650 *845,000= 325,000. Accounts payable is charged on the basis of checks so the wholesale department would get 5,600/16,000 *320,000= 112,000 and the retail would get 10,400/16,000 * 320,000= 208,000. So put those numbers in for your allocations and you should get the correct income statements.

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